This is a business decision —We think many facets of an ROI analysis apply quite well to this situation. In our experience, though, many of the analyses are fundamentally flawed in that the “return” part of the equation is often based on operating at a reduced headcount. The dream is that the ERP is so good that certain positions are no longer required because the ERP is so helpful in managing or automating the operation of the company. ERPs are not magic and none that we know fulfill the dream that is often required to achieve the ROI in the plan.
Cost — For years we have “SWAG”ed the total cost of the project to be at least the cost of the software and hardware times 2. This covers: surprises in the plan that cost more than expected, lost productivity associated with training, the inefficiencies of the learning process, lost business from disappointed customers and other miscellaneous situations that will occur.
Changing ERPs is like open heart surgery, you don’t do it when there are reasonable alternatives — There are other similarities: The survival rates for both procedures are improving. Often the quality of life is reasonable afterwards. There is an old joke where the patient asks the heart surgeon, “Doctor, will I be able to play the piano after the operation?” The doctor replies, “I think so.” And the patient, responds, “That’s amazing since I cannot play the piano now.” When the process is over, most businesses do not do much more than they did before…the team in place has the same skills or lack of skills they had before the change. Sure there will be training and revised processes but many wholesalers seem to revert back to the same old ways of doing business as they did before. This is another reason that wholesalers seem to miss their ROI projections.
A new ERP does not make you cool — We know a middle-aged, average guy who bought a very nice hot car. Might be a mid-life crisis. Now, whenever he drives up to a store or restaurant, people turn and watch to see who gets out of the car. Then the guy gets out and he is pretty much the same average guy as before, except the darn thing sits so low to ground, he has to almost crawl out of it…he loses a bunch of style points for that. (For the record, we are not referring to Rich here.) We are big proponents of efficient back-office operations but those start with a great team with driven leaders and are supported by both old and new software. Some of the best run wholesalers we know are using real old software. To be fair, we also know a lot of well-run companies that use late model software systems; but the common threads are the great team and driven leadership.
Focus on the customer-facing aspects of the software — The functions that make or break your project are the ones that impact your customers. We have seen a crack counter team reduced to inept bozos by their new computer system…and the customers DID notice. Products could not be found, pricing could not be quoted, and inventory could not be located by the same team that last week was known for their efficiency. Some of it was lack of training, some of it was poor configuration by the installer and the wholesaler’s conversion team. It doesn’t take very many bad customer service events to convince a busy contractor to try a competitor. Time how long it takes your team to enter an order and don’t go live until they can do it just as well with the new software. (BTW, this is a good idea when you are installing new versions of your ERP. Programmers who are tasked with writing the code sometimes forget that all the gingerbread and cool gizmos don’t matter if you can’t quickly find, quote and deliver that white toilet that the customer wants.)
Third Parties — For years, ERP vendors tried to provide all things to all wholesalers. As we have warned wholesalers, the all-things-to-all-people strategy has, in our experience, never succeeded. Many of the ERP providers now understand that they cannot provide best-in-class applications in all areas for all wholesalers. To that end they are designing third party connectivity into their system allowing third party web stores, CRMs, payroll and other applications. As you look at your needs, the best solutions may be from several vendors layered on top of a base ERP package.
Your ERP is no longer supported — This is always tough when the ERP’s software company ends support on a perfectly good or maybe pretty good package. You are able to run your business with it, have only needed support twice in the last 2 years and your people are pretty good at using it. We understand that it is difficult for software companies to support legacy software that runs on MS DOS. (For those of you who haven’t heard of DOS, it was the operating system before Windows 3.1, which was several versions before Vista.) Often there are viable options where 3rd party companies can provide support for these systems.
Don’t assume anything — When an ERP sales person tells you that a certain feature is in his package, even if he has the very best intent, it is unlikely that he understands your needs and the applicability of his software to meet those needs. Every wholesaler is different, so your job is to take that deep dive into your needs and then to get the ERP provider to explain specifically how his package addresses those needs. Ideally, the ERP provider’s answer will come in the form a customer visit to demonstrate the answers in a wholesaler of similar size and with similar business needs. If you are a growing 20 branch wholesaler, make sure the package supports 20 branches and has the room to grow for the next decade. Of course, not everything is a critical, show-stopping situation but you want to dig into order entry, inventory management, billing, paying and sales support in depth since they are the heart of most companies, plus any other areas that you feel are critical success factors for your business.
Distraction — We cannot overstate the level of distraction that the installation of a new ERP creates from the wholesaler’s primary business of selling product to contractors…or whatever the core business is. We don’t even have a guess as to the level of distraction; but it is almost as if the whole company has had a stroke. There are so many tasks that were once second nature that now must be relearned in order to complete the day’s business. In addition to completing tasks, many of the reports and information screens will need to be relearned so the business can be properly operated.
So that’s our list of thoughts. Hope it helps you to go into the process with your eyes wide open and maybe prevent a few surprises along the way.